UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 20162017

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

COMMISSION FILE NUMBER: 333-148925

LEGACYXCHANGE, INC.

(Exact name of Registrant as specified in its charter)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 62,570,659 shares as of December 15,30, 2020.

LEGACYXCHANGE, INC.

Form 10-Q

December 31, 20162017

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LEGACYXCHANGE, INC.

CONSOLIDATED BALANCE SHEETS

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

LEGACYXCHANGE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

LEGACYXCHANGE, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

For the Three and Nine Months Ended December 31, 20162017 and 20152016

(UNAUDITED)

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

LEGACYXCHANGE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

LEGACYXCHANGE, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 20162017

NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS

LegacyXchange, Inc., formerly known as True 2 Beauty, Inc. (the “Company”) was originally incorporated as Burrow Mining, Inc., a Nevada corporation, on December 11, 2006. In February 2010, the Company amended its Articles of Incorporation and changed its name to True 2 Beauty, Inc.

On July 10, 2012, the Company formed a new wholly owned subsidiary True2Bid, Inc. (“True2Bid”) which was incorporated in the state of Nevada. This subsidiary’s name was changed to LegacyXchange, Inc. (“LegacyXchange”) in December 2014. The Company continued to sell existing inventory of beauty products through May 2013 when the final inventory was sold. LegacyXchange operates an online e-commerce platform focused on delivering users a wide array of sports and entertainment related products that can be won in an action-packed environment of a live auction.

On July 2, 2015, pursuant to a Certificate of Dissolution filing with the Nevada Secretary of State, the Company dissolved LegacyXchange (formerly True2Bid, Inc.) to allow for the change in name of its parent company, True 2 Beauty, Inc., to LegacyXchange, Inc.

The Company is currently inactive due to lack of working capital to fund its operations.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company’s unaudited consolidated financial statements up to the period ending June 30, 2015 include the financial statement of its wholly-owned subsidiary, True2Bid, Inc. With the dissolution of this subsidiary in July 2, 2015, the financial statements for the three and nine months ended December 31, 2016 are no longer consolidated. All intercompany accounts and transactions have been eliminated in consolidation.

Management acknowledges its responsibility for the preparation of the accompanying unaudited consolidated financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its financial position and the results of its operations for the periods presented. The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S. GAAP”) for interim financial information and with the instructions Article 8-03 of Regulation S-X. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. Certain information and note disclosure normally included in financial statements prepared in accordance with U.S. GAAP has been omitted from these financial statements pursuant to such accounting principles and, accordingly, they do not include all the information and notes necessary for comprehensive financial statements. These unaudited consolidated financial statements should be read in conjunction with the summary of significant accounting policies and notes to the consolidated financial statements for the year ended March 31, 20162017 of the Company which were included in the Company’s annual report on Form 10-K as filed with the Securities and Exchange Commission on December 4,23, 2020.

Going Concern

The unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in our accompanying unaudited consolidated financial statements, the Company had net income and net cash used in operating activitiesloss of $354,546 and $15,364, respectively,$106,086 for the nine months ended December 31, 2016. The net income was primarily attributed to the gain from the change in far value of derivative liabilities.2017. The Company had accumulated deficit, stockholders’ deficit and working capital deficit of $10,191,491, $946,345$10,373,935, $1,128,789 and $946,345,$1,128,789, respectively, at December 31, 2016.2017. The Company had no revenues for the nine months ended December 31, 2016,2017. The Company’s loans and we defaulted on our loans.certain convertible notes are currently in default. Management believes that these matters raise substantial doubt about the Company’s ability to continue as a going concern for twelve months from the issuance date of this report.

Management cannot provide assurance that we will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. Management believes that our capital resources are not currently adequate to continue operating and maintaining its business strategy for a period of twelve months from the issuance date of this report. The Company will seek to raise capital through additional debt and/or equity financings to fund its operations in the future.

LEGACYXCHANGE, INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016

Although the Company has historically raised capital from sales of equity and from the issuance of promissory notes, there is no assurance that it will be able to continue to do so. If the Company is unable to raise additional capital or secure additional lending in the near future, management expects that the Company will need to curtail or cease operations. These unaudited consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

LEGACYXCHANGE, INC.

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
DECEMBER 31, 2017

Use of Estimates

The preparation of the unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates during the nine months ended December 31, 20162017 include assumptions used in the valuation of derivative liabilities.

Fair Value of Financial Instruments and Fair Value Measurements

FASB ASC 820 - Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 requires disclosures about the fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the fair value of financial instruments are based on pertinent information available to the Company on December 31, 2016.2017. Accordingly, the estimates presented in these consolidated financial statements are not necessarily indicative of the amounts that could be realized on disposition of the financial instruments. FASB ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

The three levels of the fair value hierarchy are as follows:

The carrying amounts reported in the balance sheets for cash, due from and to related parties, prepaid expenses, accounts payable and accrued liabilities approximate their fair market value based on the short-term maturity of these instruments.

Assets or liabilities measured at fair value on a recurring basis included conversion options in convertible notes and warrants with their exercise price containing a down-round provision (see Note 6)5) and were as follows at December 31, 20162017 and March 31, 2016:2017:

A roll forward of the level 3 valuation financial instruments is as follows:

LEGACYXCHANGE, INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016

ASC 825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding financial instruments.

Cash and Cash EquivalentsLEGACYXCHANGE, INC.

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
DECEMBER 31, 2017

For purposes of the unaudited statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents. At December 31, 2016 and March 31, 2016, the Company did not have any cash equivalents.Cash

The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. There were no balances in excess of FDIC insured levels as of December 31, 20162017 and March 31, 2016.2017. The Company has not experienced any losses in such accounts through December 31, 2016.

Inventory

Inventories are stated at the lower of cost or market value. Cost is determined using the cost to acquire inventory and is valued using the first-in, first-out method. During the nine months ended December 31, 2016, the Company determined that the inventory of $570 was impaired and was written off. As of December 31, 2016 and March 31, 2016, the Company’s inventory was not significant as the Company was inactive during the nine months ended December 31, 2016.2017.

Derivative Liabilities

The Company has certain financial instruments that are embedded derivatives associated with capital raises and certain warrants. The Company evaluates all its financial instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815-10 – Derivative and Hedging – Contract in Entity’s Own Equity. This accounting treatment requires that the carrying amount of any derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion, repayment or exercise date and then the related fair value amount is reclassified to other income or expense as part of gain or loss on debt extinguishment.

In July 2017, FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features. These amendments simplify the accounting for certain financial instruments with down-round features. The amendments require companies to disregard the down-round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. The adoption of this guidance is not expected to have a material impact on the Company’s financial statements.

Revenue Recognition

In May 2014, FASB issued an update Accounting Standards Update, ASU 2014-09, establishing ASC 606 - Revenue from Contracts with Customers. ASU 2014-09, as amended by subsequent ASUs on the topic, establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard, which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017, requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures. adoptionAdoption of this guidance is not expected to have a material impact on the process for, timing of, and presentation and disclosure of revenue recognition from customers. The Company did not have revenues from operations for the three and nine months ended December 31, 2016.

LEGACYXCHANGE, INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 20162017.

Stock-Based Compensation

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

In June 2014, the FASB issued Accounting Standards Update No. 2014-12, Compensation — Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force) (ASU 2014-12). The guidance applies to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period is treated as a performance condition. For all entities, the amendments in this Update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The effective date is the same for both public business entities and all other entities. The Company early adopted ASU 2014-12 during the period ending June 30, 2016. The adoption of ASU 2014-12 did not have any material impact on the Company’s financial statements.

LEGACYXCHANGE, INC.

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
DECEMBER 31, 2017

Pursuant to ASC 505-50 - Equity-Based Payments to Non-Employees, all share-based payments to non-employees, including grants of stock options, were recognized in the financial statements as compensation expense over the service period of the consulting arrangement or until performance conditions are expected to be met. Using a Black Scholes valuation model, the Company periodically reassessed the fair value of non-employee options until service conditions are met, which generally aligns with the vesting period of the options, and the Company adjusts the expense recognized in the consolidated financial statements accordingly. In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies several aspects of the accounting for nonemployee share-based payment transactions by expanding the scope of the stock-based compensation guidance in ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees. ASU No. 2018-07 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted, but entities may not adopt prior to adopting the new revenue recognition guidance in ASC 606. The adoption of this guidance is not expected to have a material impact on the Company’s financial statements.

Income Taxes

The Company accounts for income tax using the liability method prescribed by ASC 740 - Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset net deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.

On December 22, 2017, the United States signed into law the Tax Cuts and Jobs Act (the “Act”), a tax reform bill which, among other items, reduces the current federal income tax rate to 21% from 34%. The rate reduction is effective January 1, 2018, and is permanent. The Act will cause the Company’s deferred income taxes to be revalued. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through income tax expense. The ultimate impact of the Act may differ from estimates due to the Company’s continued analysis or further regulatory guidance that may be issued as a result of the Act.

The Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. As of December 31, 20162017 and March 31, 2016,2017, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Company recognizes interest and penalties related to uncertain income tax positions in other expense. However, no such interest and penalties were recorded as of December 31, 2016.

Shipping Costs

Shipping costs are included in other selling, general and administrative expense and totaled were not significant for the three and nine months ended December 31, 2016 and 2015.

Advertising

Advertising is expensed as incurred and is included in other selling, general and administrative expense. The Company did not incur any advertising expense for three and nine months ended December 31, 2016 and 2015.

LEGACYXCHANGE, INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 20162017.

Basic and Diluted Income (Loss) Per Share

Pursuant to ASC 260-10-45, basic income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the periods presented. Diluted income (loss) per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. Potentially dilutive common shares consist of common stock issuable for stock options and warrants (using the treasury stock method), convertible notes and common stock issuable. These common stock equivalents may be dilutive in the future. The following potentially dilutive equity securities outstanding as of December 31, 20162017 and 20152016 were not included in the computation of dilutive income (loss) per common share because the effect would have been anti-dilutive:

LEGACYXCHANGE, INC.

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
DECEMBER 31, 2017

The following is a reconciliation of the numerator and denominator used in the basic and diluted earnings per share calculations for the three and nine period ended December 31, 2016 and 2015:2016:

Related Parties

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

Recent Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13—Fair Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement, to modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company does not believe this will have a material impact on the Company’s financial statements.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the Company’s financial statements.

LEGACYXCHANGE, INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016

NOTE 3 – PREPAID EXPENSES

At December 31, 2016 and March 31, 2016, prepaid expenses consisted of the following:

NOTE 43 – ACCRUED LIABILITIES

At December 31, 20162017 and March 31, 2016,2017, accrued liabilities consisted of the following:

LEGACYXCHANGE, INC.

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
DECEMBER 31, 2017

NOTE 54 – LOANS PAYABLE

Between July 2015 through March 2016, the Company entered into individual loan agreements with various investors in the aggregate principal amount of $132,769. These loans bear an interest rate of 10% and were due and payable on the first anniversary of the date of issuance of the loans. As of March 31, 2016, these loans had outstanding principal and accrued interest of $132,769 and $2,751, respectively.

In April and May 2016, the Company entered into individual loan agreements with various investors in the aggregate principal amount of $11,155. These loans bear an interest rate of 10% and were due and payable on the first anniversary of the date of issuance of the loans.

As of December 31, 2017, these loans were in default and had outstanding principal and accrued interest of $143,924 and $28,272, respectively. As of December 31, 2016, certain of these loans were in default and had outstanding principal and accrued interest of $143,924 and $13,680, respectively.

During the three and nine months ended December 31, 2017, the Company recorded interest expense of $3,678 and $10,994, respectively, on these loans. During the three and nine months ended December 31, 2016, the Company recorded interest expense of $3,678 and $10,928, respectively, on these loans. During the three and nine months ended December 31, 2015, the Company recorded interest expense of $630 and $4,819, respectively, on these loans.

NOTE 65 – CONVERTIBLE NOTES PAYABLE

At December 31, 20162017 and March 31, 2016,2017, convertible notenotes consisted of the following:

LEGACYXCHANGE, INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016

Fiscal 2015 Financing

In October and November 2014, the Company entered into a subscription agreement with various purchasers (the “Fiscal 2015 Agreements”) for the sale of the Company’s convertible notes. Pursuant to the Fiscal 2015 Agreements, the Company issued to these purchasers, convertible promissory notes (the “Fiscal 2015 Convertible Notes”) for an aggregate principal amount of $400,000 with the Company receiving proceeds equal to the principal amount. The Fiscal 2015 Convertible Notes bear an interest rate of 10% per year and were due and payable on the third anniversary of the date of issuance through October and November 2017. The purchasers are entitled, at their option, at any time after the issuance of the Fiscal 2015 Convertible Notes, to convert all or any lesser portion of the outstanding principal amount and accrued and unpaid interest into the Company’s common stock at a conversion price of $0.02 During the fiscal year 2016, the conversion price was ratcheted down to $0.01. During the fiscal year 2016, the purchasers converted $130,510 and $10,792 of outstanding principal and accrued interest, respectively, into 7,065,084 shares of the Company’s common stock. As of March 31, 2016,2017, the Fiscal 2015 Convertible Notes had outstanding principal and accrued interest of $269,490 and $40,197,$67,520, respectively. As of December 31, 2016,2017, the Fiscal 2015 Convertible Notes were in default and had outstanding principal and accrued interest of $269,490 and $60,783,$88,106, respectively.

Fiscal 2016 Financing

In May and June 2015, the Company entered into a subscription agreement with various purchasers (the “Fiscal 2016 Agreements I”) for the sale of the Company’s convertible notes and warrants. Pursuant to the Fiscal 2016 Agreements I, the Company issued to the purchasers for an aggregate subscription amount of $115,000: (i) convertible promissory notes in the aggregate principal amount of $115,000 (the “Fiscal 2016 Notes I”) and (ii) five-year warrants to purchase an aggregate of 2,300,000 (twenty warrants for each dollar of the principal amount) shares Company’s common stock at an exercise price of $0.07 (the “Fiscal 2016 Warrants I”). The Company received proceeds equal to the principal amount. The Fiscal 2016 Notes I bear an interest rate of 10% per year and were due and payable on the third anniversary of the date of issuance through May and June 2018. The purchasers are entitled, at their option, at any time after the issuance of the Fiscal 2016 Notes I, to convert all or any lesser portion of the outstanding principal amount and accrued and unpaid interest into the Company’s common stock at a conversion price of $0.05. The conversion price of the Fiscal 2016 Notes I shall be subject to adjustment for issuances of common stock at a purchase price of less than the then-effective conversion price. During the fiscal year 2016, the conversion price was ratcheted down to $0.01. As of March 31, 2016,2017, the Fiscal 2016 Notes I had outstanding principal and accrued interest of $115,000 and $10,074,$21,733, respectively. As of December 31, 2016,2017, the Fiscal 2016 Notes I had outstanding principal and accrued interest of $115,000 and $18,858,$30,518, respectively.

LEGACYXCHANGE, INC.

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
DECEMBER 31, 2017

During August through September 2015, the Company entered into a subscription agreement with various purchasers (the “Fiscal 2016 Agreements II”) for the sale of the Company’s convertible notes and warrants. Pursuant to the Fiscal 2016 Agreements II, the Company issued to the purchasers for an aggregate subscription amount of $96,250: (i) convertible promissory notes in the aggregate principal amount of $96,250 (the “Fiscal 2016 Notes II”) and (ii) five-year warrants to purchase an aggregate of 1,925,000 (twenty warrants for each dollar of the principal amount) shares Company’s common stock at an exercise price of $0.07 (the “Fiscal 2016 Warrants II”). The Company received proceeds equal to the principal amount. The Fiscal 2016 Notes II bear an interest rate of 10% per year and were due and payable on the third anniversary of the date of issuance through August through September 2018. The purchasers are entitled, at their option, at any time after the issuance of the Fiscal 2016 Notes II, to convert all or any lesser portion of the outstanding principal amount and accrued and unpaid interest into the Company’s common stock at a conversion price of $0.05. The conversion price of the Fiscal 2016 Notes II shall be subject to adjustment for issuances of common stock at a purchase price of less than the then-effective conversion price. During the fiscal year 2016, the conversion price was ratcheted down to $0.01. As of March 31, 2016,2017, the Fiscal 2016 Notes II had outstanding principal and accrued interest of $96,250 and $5,203,$17,395, respectively. As of December 31, 2016,2017, the Fiscal 2016 Notes II had outstanding principal and accrued interest of $96,250 and $12,555,$22,314, respectively.

During the three and nine months ended December 31, 2017, the Company recorded interest expense of $12,286 and $36,723 on these convertible notes. During the three and nine months ended December 31, 2016, the Company recorded interest expense of $12,285 and $36,723 on these convertible notes.

During the three and nine months ended December 31, 2015, the Company recorded interest expense of $13,270 and $36,420 on these convertible notes.

Derivative Liabilities Pursuant to Notes and Warrants

In connection with the issuance of the Notes and Warrants, the Company determined that the terms of the Notes and Warrants contain terms that included a down-round provision under which the conversion price and exercise price could be affected by future equity offerings undertaken by the Company or contain terms that are not fixed monetary amounts at inception and included various other terms such as default provisions that caused derivative treatment. Accordingly, under the provisions of ASC 815-40 –Derivatives and Hedging – Contracts in an Entity’s Own Stock, the embedded conversion option contained in the convertible instruments and the Warrants were accounted for as derivative liabilities at the date of issuance and shall be adjusted to fair value through earnings at each reporting date. The fair value of the embedded conversion option derivatives and warrant derivatives were determined using the Binomial valuation model. At the end of each period, on the date that debt was converted into common shares, and on the date of a cashless exercise of warrants, the Company revalued the embedded conversion option and warrants derivative liabilities.

LEGACYXCHANGE, INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016

In July 2017, FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features. These amendments simplify the accounting for certain financial instruments with down-round features. The amendments require companies to disregard the down-round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. The Company is currently evaluating the impact of ASU No. 2017-11 on its consolidated financial statements.

In connection with the issuance of the Fiscal 2016 Financing Notes and related Warrants, during year ended March 31, 2016, on the initial measurement date, the fair values of the conversion option derivative and warrants derivative of $403,401 was recorded as derivative liabilities and was allocated as a debt discount of $211,250 with the remaining $192,151 recorded as derivative expense.

At December 31, 20162017 and 2015,2016, the Company revalued the conversion option and warrant derivative liabilities. In connection with these revaluations and the initial derivative expense, the Company recorded gain onfrom the change onin fair value of derivative liabilities of $707,071$70,134 and $1,022,446$707,071 for the nine months ended December 31, 20162017 and 2015,2016, respectively.

At December 31, 2016,2017, the fair value of the derivative liabilities was estimated using the Binomial valuation model with the following assumptions:

For the three and nine months ended December 31, 2017, amortization of debt discounts related to the convertible notes amounted to $19,094 and $67,753, respectively, which has been included in interest expense on the accompanying unaudited statements of operations.

For the three and nine months ended December 31, 2016, amortization of debt discounts related to the convertible notes amounted to $41,573 and $124,719, respectively, which has been included in interest expense on the accompanying unaudited consolidated statements of operations.

For the three and nine months ended December

LEGACYXCHANGE, INC.

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
DECEMBER 31, 2015, amortization of debt discounts related to the convertible notes amounted to $42,466 and $178,751, respectively, which has been included in interest expense on the accompanying unaudited consolidated statements of operations.2017

NOTE 76 – STOCKHOLDERS’ DEFICIT

Authorized shares

The Company is authorized to issue 200,000,000 consisting of 190,000,000 shares of common stock at $0.001 per share par value, and 10,000,000 shares of preferred stock at $0.001 per share par value.

Preferred Stock

As of December 31, 20162017 and March 31, 2016,2017, the Company did not have any preferred stock issued and outstanding.

Common Stock

CommonAs of December 31, 2017 and March 31, 2017, the Company had 62,570,659 shares of common stock issued for servicesand outstanding.

LEGACYXCHANGE, INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016

Common stock issued to a former related party for services

Common stock issued for payment of loan fees

Common stock issued for debt conversion

Warrants

Warrants issued pursuant to equity subscription agreements

During fiscal years 2013 to 2015, in connection with the sale of common stock, the Company issued an aggregate of 1,048,315 five-year warrants to purchase common shares for an exercise price of $0.40 per common share to investors pursuant to unit subscription agreements. These warrants were accounted for as equity. As of March 31, 2017, 1,048,315 warrants were issued and outstanding. During the nine months ended December 31, 2016 and March2017, 406,750 of warrants expired. As of December 31, 2016, 1,048,3152017, 641,565 warrants were issued and outstanding.

Warrants issued in connection with the Fiscal 2016 Financing

During fiscal years 2016, pursuant to the convertible note agreements under the fiscal 2016 financing discussed in Note 6,5, the Company issued five-year warrants to purchase an aggregate of 4,225,000 (twenty warrants for each dollar of the principal amount) shares of the Company’s common stock at an exercise price of $0.07. The exercise price of these warrants shall be subject to adjustment for issuances of common stock at a purchase price of less than the then-effective conversion price and were accounted for as derivative liabilities. During the fiscal year 2016, the conversion price was ratcheted down to $0.01. As of December 31, 20162017 and March 31, 2016,2017, 4,225,000 warrants were issued and outstanding.

Warrant activity for the nine months ended December 31, 20162017 are summarized as follows

NOTE 87 – SUBSEQUENT EVENTS

Between October 2017 and November 2017, the Fiscal 2015 Convertible Notes defaulted due to non-payment at maturity date and between May 2018 and September 2018, the Fiscal 2016 Convertible Notes I and II defaulted due to non-payment at maturity date (see Note 6)5).

Between November 2019 through June 2020, the Company entered into loan agreements with an investor in the aggregate principal amount of $91,000. The loans bear interest rate of 6% and were due and payable two-years from the date of issuances.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

LegacyXchange, Inc., formerly known as True 2 Beauty, Inc. (the “Company”) was originally incorporated as Burrow Mining, Inc., a Nevada corporation, on December 11, 2006. In February 2010, the Company shifted its focus to the beauty industry and later amended its Articles of Incorporation and changed its name to True 2 Beauty, Inc.

On July 10, 2012, the Company formed a new wholly owned subsidiary True2Bid, Inc. (“True2Bid”) which was incorporated in the state of Nevada. This subsidiary’s name was changed to LegacyXchange, Inc. (“LegacyXchange”) in December 2014. The Company continued to sell existing inventory of beauty products through May 2013 when the final inventory was sold. LegacyXchange operates an online e-commerce platform focused on delivering users a wide array of sports and entertainment related products that can be won in an action-packed environment of a live auction. The Company is currently inactive and is seeking other business opportunities.

The Company’s articles authorize the Company to issue 190,000,000 shares of common stock and 10,000,000 shares of preferred stock, both at a par value of $0.001 per share.

The following table summarizes the results of operations for the three and nine months ended December 31, 20162017 and 20152016 and is based primarily on the comparative unaudited financial statements, footnotes and related information for the periods identified and should be read in conjunction with the financial statements and the notes to those statements that are included elsewhere in this report.

Revenue:

We did not generate any revenues from operations for the three and nine months ended December 31, 20162017 and 2015.2016.

Operating expenses:

For the three months ended December 31, 20162017 and 2015,2016, operating expenses amounted to $30,333$15,750 and $148,014,$30,333, respectively, a decrease of $117,681$14,583 or 80%48%. For the nine months ended December 31, 20162017 and 2015,2016, operating expenses amounted to $180,155$60,750 and $457,440,$180,155, respectively, a decrease of $277,285$119,405 or 61%66%.

For the three and nine months ended December 31, 20162017 and 2015,2016, operating expenses consisted of the following:

For the three months ended December 31, 20162017 and 2015,2016, compensation and related taxes amounted to $30,000$15,000 and $72,540,$30,000, respectively, a decrease of $42,540$15,000 or 59%50%. The decrease was primarily due to stock-based compensationresulted from the reduction of $25,000 in 2015.the CEO’s annual salary effective July 2017.

For the nine months ended December 31, 20162017 and 2015,2016, compensation and related taxes amounted to $91,036$60,000 and $140,306,$91,036, respectively, a decrease of $49,270$31,036 or 35%34%. The decrease was primarily due to stock-based compensationresulted from the reduction of $25,000 in 2015.the CEO’s annual salary effective July 2017.

For the three months ended December 31, 20162017 and 2015,2016, professional and consulting fees amounted to $808$750 and $64,015,$808, respectively, a decrease of $63,207$58 or 99%7%. The decrease was primarily attributable to the reduce in operational activities in 2016 compared to 2015.

For the nine months ended December 31, 20162017 and 2015,2016, professional and consulting fees amounted to $78,490$750 and $280,104,$78,490, respectively, a decrease of $201,614$77,740 or 72%99%. The decrease was primarily attributable toresulted from the reduceCompany being inactive in operational activities in 2016 compared to 2015.2017.

For the three months ended December 31, 20162017 and 2015,2016, other selling, general and administrative expenses amounted to $(475)nil and $11,459,$(475), respectively, a decreasean increase of $11,934,$475, or 104%100%. The decrease was primarily attributable to the reduce in operational activities in 2016 compared to 2015.

For the nine months ended December 31, 20162017 and 2015,2016, other selling, general and administrative expenses amounted to $10,629nil and $37,030,$10,629, respectively, a decrease of $26,401,$10,629, or 71%100%. The decrease was primarily attributable toresulted from the reduceCompany being inactive in operational activities in 2016 compared to 2015.2017.

Loss from operations:

For the three months ended December 31, 20162017 and 2015,2016, loss from operations amounted to $30,333$15,750 and $148,014,$30,333, respectively, a decrease of $117,681,$14,583, or 80%48%. The change was a result of the changes in operating expenses as discussed above.

For the nine months ended December 31, 20162017 and 2015,2016, loss from operations amounted to $180,155$60,750 and $457,440,$180,155, respectively, a decrease of $277,285,$119,405, or 61%66%. The change was a result of the changes in operating expenses as discussed above.

Other income (expense):

Other income (expense) includes interest expense initial derivative expense and gain (loss) from the change in fair value of derivative liabilities.

For the three months ended December 31, 2016,2017, total other (expense), net amounted to $(19,552) as compared to total other income, net amounted toof $35,493 as compared $674,388 for the three months ended December 31, 2015,2016, a decreasechange of $638,895$55,045 or 95%155%. The decreasechange was attributable to a decrease in initial derivativeinterest expense of $35,486,$22,478, or 100%39% and a decrease in the gain from the change in fair value of derivative liabilities of $77,523 or 83%.

For the nine months ended December 31, 2017, total other (expense), net amounted to $(45,336) as compared to total other income, net of $534,701 for the nine months ended December 31, 2016, a change of $580,037 or 108%. The change was attributable to a decrease in interest expense of $56,900, or 33% and a decrease in the gain from change in fair value of derivative liabilities of $673,211$636,937 or 88% offset by an increase in interest expense of $1,170, or 2%.

For the nine months ended December 31, 2016, total other income, net, amounted to $534,701 as compared to $600,133 for the nine months ended December 31, 2015, a decrease of $65,432 or 11%. The decrease was attributable to decrease in initial derivative expense of $202,323, or 100%, decrease in interest expense of $47,620, or 22% for a total decrease in other (expense) of $ (249,943) offset by decrease in the gain from change in fair value of derivative liabilities of $315,375 or 31%90%.

Net (loss) income:

For the three months ended December 31, 2016,2017, net income(loss) amounted to $5,160,$(35,302), or per common share of $0.00 basic$(0.00) (basic and $(0.00) diluteddiluted) as compared to $526,374$5,160 net income, or per common share of $0.01$0.00 basic and $(0.00) diluted for the three months ended December 31, 2015,2016, a change of $521,214,$40,462, or 99%784%. The change was a result of the changes in operating expenses and other income (expense) as discussed above.

For the nine months ended December 31, 2016,2017, net income(loss) amounted to $354,546,$(106,086), or per common share of $0.01 basic$(0.00) (basic and $(0.00) diluteddiluted) as compared to $142,693$354,546 net income, or per common share of $0.00$0.01 basic and $(0.00) diluted for the nine months ended December 31, 2015,2016, a change of 211,853,$460,632, or 148%130%. The change was a result of the changes in operating expenses and other income (expense) as discussed above.

Liquidity and Capital Resources

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had a working capital deficit of $946,345$1,128,789 and $0 of cash as of December 31, 20162017 and working capital deficit of $1,300,891$1,022,703 and $4,209$0 of cash as of March 31, 2016.2017.

The decreaseincrease in working capital deficit was primarily attributable to a decrease in current assets of $65,826 and decreasean increase in current liabilities of $420,372.$106,086.

Cash Flow

A summary of cash flow activities is summarized as follows: